Litigation insurance – even after the lawsuit has been filed!

A handful of posts have touched on aspects of litigation insurance, each to report on such coverage for different types of litigation risks and the effect the insurance might have on benchmarks (See my posts of July 20, 2005 on IP litigation insurance, and Nov. 16, 2005 (3rd morsel) for its availability in Europe; July 30, 2005 on third-party insurance coverage and total legal spending; May 31, 2005 on insurance where the loser pays the other sides’s fees; and March 23, 2006 (4th morsel) on employment practices liability insurance.).

Marsh & McLennan’s Viewpoint, Vol. 32, No. 2 of 2003, at 5 brings a broader perspective: “A relatively small group of insurers specialize in assessing and valuing open litigation in such areas as securities, intellectual property, and product liability. Once the merits of the litigation and the probably losses have been evaluated, an insurance policy can serve as an asset on a company’s balance sheet to potentially mitigate or cap the liability.” The paragraph later refers to this technique of ex post facto litigation insurance as “ring fencing.”

Might the availability of litigation insurance after a lawsuit has been filed help a law department better manage its litigation costs? How does such insurance coverage affect reserves? Should large law departments, already possessed of specialized talent (See my post of Sept. 10, 2005 for a list.), include experts on litigation insurance brokerage?